Supreme Court Hears Medicaid CaseAt issue is whether doctors, hospitals and patients can go to court to challenge cuts in Medicaid. The case is from California, which cut the amount it pays health providers without seeking approval from the federal Medicaid agency as required by law. Health care providers sued.

The U.S. Supreme Court has opened a new term with a raft of hot-button issues headed its way. The biggest is the legal challenge to the Obama health care law, a case almost certain to be heard this term. On Monday, however, the court heard arguments in another case involving the provision of medical care, a case with enormous ramifications for states desperate to cut costs, and patients desperate to get medical care. The issue is whether doctors, hospitals, and patients can go to court to challenge cuts in Medicaid.

The federal Medicaid law establishes a cooperative federal-state program to provide medical care for the poor. Depending on the state, the federal government pays between 50 and 75 percent of the costs, but the condition for getting the federal money is that the state pay health providers sufficiently to ensure that poor patients have access to doctors and hospitals.

In 2008 and 2009, California cut these fees by up to 10 percent, and the cuts went into effect without being submitted to the federal Medicaid agency for approval as required by law. Health care providers went to court, contending that the cuts were solely for budgetary purposes and did not meet the federal requirements for balancing money issues and access to health care. On the steps of the Supreme Court on Monday, California Medical Association doctors said they simply can't afford to take care of substantial numbers of Medicaid patients when fees are so low. Dr. Ted Mazer said, for example, that the California Medicaid program pays him $168 to perform a tonsillectomy on a child, including pre- and postoperative care, and that, he said, is not enough to even cover his costs.

Seeking to stop this downward spiral, doctors, hospitals and patients went to court and won a temporary injunction to freeze the status quo pending a trial. The state, backed by the Obama administration, appealed.

'Drastic' Remedy

Inside the Supreme Court chamber on Monday, California Deputy Attorney General Karen Schwartz told the justices that doctors and patients have no right to bring a court challenge because the Medicaid law does not explicitly authorize such suits. Justice Ruth Bader Ginsburg noted that the federal government doesn't have injunctive power to stop the rate cuts, even if it thinks the state is violating the Medicaid law. Schwartz agreed with that assessment, saying that the only option for the federal government is to cut off all funds to the state's Medicaid program.

But, Justice Ginsburg observed that removing that funding would be a "drastic" remedy that would hurt the people that Medicaid was meant to benefit. Nevertheless, Schwartz responded, there is no other remedy provided by the law. She said that generally states simply resolve these issues in consultation with the federal Medicaid agency. Justice Elena Kagan observed that there was no consultation to resolve this case because California "end-ran the administrative process" by putting rate changes into effect before submitting them to the Department of Health and Human Services as required by law.

Focusing on the core question of whether the doctors, hospitals and patients in this lawsuit had the right to sue at all, Justice Samuel Alito noted that Congress never explicitly creates a right to sue in a case like this involving federal spending. He went on, asking if Schwartz was asking to adopt a rule that "is good for this case only."

Justice Anthony Kennedy added that "the courts have the prerogative, perhaps even the obligation" to freeze the status quo and "simply withhold adjudication until the agency acts."

Lawsuits Galore?

Justice Ginsburg also inquired into what kind of sanctions could be carried out against California health care providers, including doctors, who violate California law by "charg[ing] more than the state ceiling" for treating patients. The law states that physicians would be "subject to sanctions." Schwartz replied that the state had not threatened to punish any providers for overcharging.

But Justice Scalia was unconvinced. "That could happen, couldn't it?" he asked. Schwartz conceded the point and sat down.

The legal worm turned, however, when attorney Carter Phillips got up to argue on behalf of the medical providers and patients. Chief Justice John Roberts repeatedly asked why Phillips' clients can sue when Congress did not authorize lawsuits, and Phillips repeatedly answered that his clients are not asking for damages; they are just suing to prevent irreparable harm to health care under a state law that violates a federal law. In such conflicts, he argued, the Supremacy Clause of the Constitution means that federal law is supreme, and that is the longtime teaching of Supreme Court decisions dating back to the 1800s.

Justice Stephen Breyer asked what limits there could be under that theory: Wouldn't there be lawsuits galore? Phillips replied that the federal agency always has the ultimate authority to step in and take action, but here the state tried to put "unlawful" rate cuts into effect without even notifying the agency and then made no response when the agency asked for information. Without court action, he said, these illegal cuts would have gone into effect for years and indeed would still be in place. Unpersuaded, Justice Breyer reiterated that if anyone could challenge a state law on the grounds it violates a federal law, it would just be "a mess."

The justices all looked rested and ready for a new term, or, as lawyer Phillips put it ruefully, "the penalty for being the first argument in the new term is that the justices are full of energy."

Monday also marked an important landmark for the current court's longest-serving justice, Antonin Scalia. Chief Justice Roberts opened the day's proceedings by observing that 25 years ago, Scalia heard his first case as a Supreme Court justice, and "the place has not been the same since."